Insurance is required to drive in most states, and since the pandemic the bill has climbed fast. Knowing why rates are rising helps when choosing a car, because the premium is part of what a vehicle really costs to own.
How much rates have gone up
By the end of February 2024, auto insurance rates were 21% higher than a year earlier, the largest 12-month rise since 1976. Insurance is also taking a bigger slice of the total cost of owning a car, alongside the payment, fuel and maintenance.
| Rate increase, 12 months to February 2024 | 21% |
|---|---|
| Last time rates rose this fast | 1976 |
| Insurance share of the rise in ownership costs | 16% in 2019, predicted 26% for 2024 |
What is pushing premiums up
Inflation
Prices for nearly everything rose sharply in recent years. Medical bills, repairs and accident claims all became more expensive, and insurers passed those costs on through higher premiums.
Repairs cost more
The cost of repairing a car rose 6.7% in 2024. That is a slower climb than in the years just before, but still well above the increases common before the pandemic. Supply chain problems led to part shortages, higher storage fees and pricier substitute parts.
More, and worse, accidents
Traffic deaths have risen faster since the pandemic, and claims have grown in both number and severity. Insurers lost money on 27% of collision claims in 2022, up from 24% in 2021.
| Collision claims with a loss, 2021 | 24% |
|---|---|
| Collision claims with a loss, 2022 | 27% |
| Rise in repair costs in 2024 | 6.7% |
Fewer mechanics
A shortage of auto mechanics has raised the price of labor, which makes every repair, and every claim, more expensive.
Extreme weather
Hurricanes, floods, wildfires and hail are causing more damage more often, and rates have risen most in the regions hit hardest. Hurricane Ian alone caused an estimated $47 billion in insured losses across central Florida and the Carolinas in 2022, which matters for drivers in South Florida.
How higher rates change car shopping
- Some buyers wait. Higher premiums have led many people to put off buying a car.
- Lower-priced and used cars gain ground. A more expensive vehicle usually costs more to insure, so many shoppers look at cheaper models and used cars, where the total cost of ownership can be lower.
- Financing means full coverage. Lenders and leasing companies usually require full coverage, so the premium is part of the monthly budget for any financed or leased car.
The bottom line
Get an insurance quote before choosing a car, not after. A model with a lower price and lower repair costs can save money every month, and a used vehicle often keeps the total cost of ownership down.
Looking for a car that fits the budget?
Browse the current inventory or ask the sales team about affordable models in stock.